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2019 (9) TMI 175 - AT - Central ExciseCENVAT Credit - suppression of facts - Rule 9(1)(bb) of CENVAT Credit Rules, 2004 - Department was of the view that as per Rule 9(1)(bb) of CENVAT Credit Rules, 2004, the challan for availing the credit is not a valid document as the amount was not paid by BPS to the Government and it amounted to suppression of facts with intent to evade payment of duty by the service provider namely BPS - HELD THAT - In the present case, the service provider though collected the service tax from the appellant has failed to deposit with the Government. The appellant has made arrangements to adjust their dues pending with the service provider and paying the service tax on behalf of the service provider. The letter dated 21.12.2016 issued by the service provider (BPS) to appellant would establish that they have paid the service tax on behalf of BPS after adjusting all the pending dues between parties. Thus, it is very much clear from the facts that the appellant has paid the service tax at the time of paying the service charges - Merely because the service provider failed to deposit the same with the Government, the credit cannot be denied at the end of the service recipient. The Tribunal in the case of M/S LG ELECTRONICS INDIA PRIVATE LIMITED, BHARAT BHUSHAN SHARMA MANAGER VERSUS COMMISSIONER OF CENTRAL EXCISE SERVICE TAX, NOIDA 2016 (11) TMI 21 - CESTAT ALLAHABAD had occasion to analyse the similar issue and held that non-payment of service tax by service provider cannot be a ground for denying credit at the end of the service recipient. The disallowance of credit is unjustified - appeal allowed - decided in favor of appellant.
Issues:
- Availment of CENVAT credit based on invoices from a service provider who did not pay service tax to the government. - Interpretation of Rule 9(1)(bb) of CENVAT Credit Rules, 2004. - Validity of availing credit on original invoice versus supplementary invoice. - Disallowance of credit by the department and imposition of penalty. Analysis: 1. The case involved the appellants availing CENVAT credit based on invoices issued by a service provider, BPS Engineering, for services rendered. It was discovered during an audit that BPS had not paid service tax to the government for several years. The department alleged suppression of facts and issued a Show Cause Notice demanding repayment along with interest and penalty. 2. The appellant argued that they had paid the service tax along with service charges to BPS, and upon discovering the non-payment to the government, they arranged to deposit the service tax and interest on behalf of BPS. The appellant contended that since the service tax was paid in full to the government, the demand and disallowance of credit were unjustified. They also pointed out that Rule 9(1)(bb) would apply only to supplementary invoices, not original ones. 3. The department, on the other hand, emphasized Rule 9(1)(bb) of the CENVAT Credit Rules, stating that if a service provider evades paying service tax, the recipient cannot avail credit. They argued that since the service provider did not deposit the tax to the government, the credit availed by the appellant was rightly disallowed. 4. Upon hearing both sides, the tribunal noted that the appellant had indeed paid the service tax to BPS along with service charges. The tribunal emphasized that the credit was taken based on the original invoice, not a supplementary one. It was established that the appellant paid the service tax at the time of paying the service charges, even though the service provider failed to remit it to the government. 5. Referring to a previous tribunal decision, the tribunal concluded that the non-payment of service tax by the service provider should not be a reason to deny credit to the service recipient. Therefore, the tribunal found the disallowance of credit unjustified, set aside the impugned order, and allowed the appeal with any consequential relief. This detailed analysis of the judgment highlights the key issues, arguments presented by both parties, legal interpretations, and the tribunal's decision, providing a comprehensive understanding of the case.
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